Steering clear of the online sharks

Posted on 12 Oct 2009 at 11:55

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Stewart Mitchell explains how to stay safe when paying for goods online and avoid becoming a victim of the fraudsters.

Shopping, trading and banking online offer endless choice and variety, brilliant bargains and simple bill-paying. According to the UK Cards Association (www.theukcardsassociation.org.uk), internet card payments have risen nearly four-fold over the past five years, to £34 billion.

However, many consumers are still wary of sending money over the internet. If you listen to the more sensational media, credit card cheats lurk on every virtual corner, while buying items from foreign countries is often considered to be just asking for trouble. In reality, common-sense steps such as choosing the right payment methods, dealing with reputable sites and keeping your security software up to date can minimise the risks. This online shopping masterclass will highlight the best ways to pay for goods online, advise on your consumer rights and highlight potential pitfalls.

Paying via the bank

Nearly 20.6 million Britons bank online. Making payments directly from your bank account is one of the simplest and surest ways of paying bills, setting up regular transfers or sending money to family or friends.

Once logged in, most bank sites offer facilities for organising one-off payments, setting up standing orders, changing payment plans and juggling money between accounts. Most, such as Barclays (www.barclays.co.uk), have simple walk-through tutorials, but some of the security can be a pain to negotiate.

For example, Intelligent Finance (www.if.com) insists that each time you set up a payment instruction you obtain an authorisation code via your mobile phone, which you then input to verify identity. Good protection, but it means that you have to remember to tell your bank every time you change your phone number.

Similarly, Nationwide, Barclays and other banks have issued account holders with card readers that generate an authorisation code when your card is inserted in response to onscreen prompts. Again, full marks for security, but if you don't have the card reader to hand - for example, when you're on holiday - you won't be able to access your account.

The banks' motivation for these high levels of security is understandable, though. According to the UK Cards Association, the level of online banking fraud soared from £22.6 million in 2007 to £52.5 million in 2008, in part due to key-logging software that can steal passwords.

Phishing trips

Another increasing threat is phishing, in which criminals set up imitations of well-known websites such as those of banks and try to convince you to input your personal details. Phishing affects all secure websites, from PayPal and banks to email, tax and social-networking sites. According to the UK Payments Administration (www.banksafeonline.org.uk), phishing attacks are the source of most online bank fraud.

Research from the financial services company CPP (www.cpp.co.uk) recently showed that 80 per cent of web users had received phishing emails in the last year. The advice that's proffered by everyone from banks to security experts is simply this: never give any account details on web pages you have reached through a link. Go directly to the site yourself, preferably from a bookmark that eliminates the chances of mistyping and landing on a copycat site.